It had to happen. Verizon Communications Inc. (VZ) announced Thursday morning that it has launched a new, lower-cost plan for its Verizon Wireless customers. The new plan, called MORE Everything, increases customers' monthly data allowances and offers a smorgasbord of other options in an effort to keep customers from defecting to competitors.
Verizon resisted competing with T-Mobile US Inc. (TMUS) when the smaller competitor launched an attack on the other major U.S. carrier AT&T Inc. (NYSE: T) late last year. AT&T launched its own lower-cost plans earlier this month, likely forcing Verizon into doing the same thing even though the company probably does not want to. Sprint Corp. (NYSE: S) also matched the T-Mobile pricing plan earlier this year.
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Verizon is paying nearly $59 billion in cash and $60.2 billion in Verizon stock for Vodafone PLC’s (VOD) 45% stake in Verizon Wireless. Following the completion of the transaction, Verizon's debt load is expected to be around $116 billion. And while it is true that the wireless business spins off a lot of cash, Verizon's cash haul will now be smaller even if the company can keep customers from leaving.
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A price war is now well and truly being fought among the four large wireless carriers. Consumers will enjoy the competition while it lasts, but unless Sprint and T-Mobile can come up with a way to merge that will get through regulatory review, neither is likely to survive on its own.
AT&T, which has already had its hopes dashed for a merger with T-Mobile, and Verizon, which is about to add nearly 50% to its long-term debt, have to hope than the cost of the war gets too high for T-Mobile to keep fighting. Both of the behemoths can last a lot longer, even if it costs them some money.
Shares of Verizon were down about 0.2% in late Thursday morning trading, at $47.28 in a 52-week range of $44.11 to $54.31.
AT&T stock was up 0.3%, at $33.04 in a 52-week range of $31.74 to $39.00. T-Mobile shares were up 0.75%m at $30.93 in a 52-week range of $16.01 to $34.10.